Tuesday, October 23, 2007
By Libby Sander

Financial aid to college students has increased by 82 percent over the past decade but still falls short of covering the average price of a college education, as the cost of attending the nation's public universities has continued to outpace inflation, family income, and sources of grant aid, according to two new surveys from the College Board.

More than $130-billion in grants, federal loans, Work-Study funds, and education tax credits and deductions was distributed to undergraduate and graduate students in the 2006-7 academic year, one of the surveys found, while students borrowed an additional $18-billion from state and private lenders to pay for their education.

But aid from the federal government, though still a major source of financial assistance for many students, is not keeping pace with rising costs, according to a report on the survey, "Trends in Student Aid."

Federally subsidized Stafford loans, in which the government pays the interest on a loan while the student is in school, accounted for less than a third of total student aid in 2006-7, down from 54 percent 10 years ago.

Pell Grants, which provide need-based assistance to low-income students, covered 32 percent of tuition, fees, and room and board costs at the average public four-year college, down from covering 54 percent of such costs 20 years ago.

And federal loans altogether made up less than half of all undergraduate aid in an increasingly complex web of financing options, the survey found.

Private loans, by contrast, now represent nearly a quarter of all education loans, up from 6 percent a decade ago, the survey found.

The College Board released the findings of the student-aid survey, along with a companion report, "Trends in College Pricing," on Monday (The Chronicle, October 22).

A summary table and a tuition database of thousands of colleges are available on The Chronicle's Web site.
Concerns About Growth of Private Loans

Commenting on the reports' findings, Gabriel Pendas, president of the United States Student Association, said, "This really paints a picture of the crisis we're seeing in higher education."

"The students taking out private loans are the ones who don't have any other option," Mr. Pendas said. "They've maxed out their federal loans, and the Pell Grants are not doing enough. It's a prime example of what, in a lot of ways, has been the privatization of our higher-education system."

Loans from private and state sources represented about 29 percent of loans taken out by undergraduates and 12 percent of loans taken out by graduate students, the student-aid survey found. Growth in private loans, which are generally more costly than loans backed by the federal government, was 27 percent a year in the five years preceding the 2006-7 academic year but slowed to a 6-percent rise last year.

A decade ago, undergraduates rarely turned to private loans, said Robert Shireman, executive director of the Project on Student Debt, an advocacy group. Now, while a relatively small proportion of undergraduates relies on private loans to pay for college, Mr. Shireman said he was concerned that such loans are increasingly common and pose significant financial risk for students because of variable interest rates and a lack of protections in the event of unemployment or disability.

"I hate to even call it 'financial aid.' We don't call a loan to buy a car 'financial aid,'" said Mr. Shireman, who was a senior education-policy adviser in the Clinton administration. "They have a much heavier drag on a college graduate just entering the work force."

Students at the nation's community colleges did receive a substantial amount of their aid from the federal government. The Pell Grant program was the only federal student-aid program to award a significant share of its dollars to students at public two-year institutions, who make up 32 percent of all full-time undergraduates, the survey found.

While students at community colleges received 34 percent of all Pell Grant dollars in the 2005-6 academic year, they received 9 percent of all assistance from the federal campus-based aid programs, 7 percent of subsidized Stafford loans, 6 percent of unsubsidized Stafford loans, and 1 percent of all federal PLUS loans (for parents), the survey found.

Faster Gains in Public-College Costs

The survey on college pricing, meanwhile, found that the average cost of a college education rose faster than the inflation rate this year, particularly at public four-year institutions. In-state tuition and fees at public four-year institutions during the 2007-8 academic year increased 6.6 percent from 2006-7, the survey found, while the price for out-of-state students rose 5.5 percent.

In dollar amounts, those increases meant that the average cost of tuition and fees for in-state students was $6,185, or $381 more than last year, the survey found. For out-of-state students, it was $16,640, or $862 more than the 2006-07 figure.

At private four-year institutions, tuition and fees increased 6.3 percent from last year, with the average cost of tuition and fees reaching $23,712, or $1,404 more than last year.

Public two-year institutions posted a 4.2-percent increase from last year's amount, averaging $2,361, or $95 more than last year.

The increase in tuition and fees this year at the nation's four-year public colleges was in keeping with a trend that has persisted for three decades, according to the survey. From 1977-78 to 2007-8, the rate of growth in the price at such institutions has been faster than at private institutions, and the dollar gap between the cost of tuition at the two types of institutions "widens every year even after adjusting for inflation," the survey found.